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Re-Bridging Loans

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Rebridging loans explained

What is a re-bridging loan?

Re-bridging loans are used to refinance an existing bridging loan if you are looking for a better interest rate, or your existing loan is coming to the end of its term.

Customers generally approach us for a re-bridging loan to either see if we can save them money by moving the loan to a lender with lower rates. Or, alternatively, if their current bridging loan is nearing the end of its term but the requirement for this type of finance is still there.

How do rebridging loans work?

Rebridging loans work in much the same way as a regular bridging loan, except you are repaying one bridging loan with another. Generally, this is with a different lender however in some instances, your existing lender may re-bridge their own loan.

Think of it like a cross between a bridging loan and a remortgage.

Key product features

Key features

Max LTV Up to 75%
Interest rate From 0.45% per month
Charge types1st, 2nd & 3rd considered
Term1-36 months (maximum 12 months for regulated loans)
Interest typeAdded to the loan, deducted or serviced
Completion timescale5 days – 3 weeks

Criteria

  • Residential, commercial property or land acceptable
  • Available to individuals, partnerships, LLPs, Ltd companies, offshore companies, foreign nationals and pension funds
  • Minimum applicant age 18 years – no maximum age
  • Available in England, Scotland, Wales and Northern Ireland
  • Adverse credit accepted (on a case by case basis)
  • Loans from £25,000 with no maximum loan size

Rebridging finance criteria

Criteria

Below are the main criteria points to consider when taking out a re-bridging loan.

– Up to 75% Loan to Value (or 100% with additional security).
– Property in a poor state of repair considered.
– Rates from 0.45% per month.
– Loans from £25,000 with no maximum loan size.
– Borrow from 1 month up to 24 months.
– Any security considered.
– Interest can be rolled into the loan.
– Loans with no early repayment charges available.
– We will consider any exit route.
– Refurbishment or conversion accepted.
– Adverse credit accepted.
– Loans available throughout the UK.

Who can apply?

Pretty much anybody can apply, whether the existing loan is in your personal name or through a limited company, or you have adverse credit, there should be lenders available.

Acceptable security

Whether you’re looking to re-bridge a residential or commercial property, or even land, there are lenders available to help.

Most lenders prefer to lend on a 1st charge basis, however 2nd charge re-bridging is doable, depending on your situation.

How much can I borrow?

What are your minimum and maximum loan sizes?

Funding starts from £25,000 with no maximum loan size.

The amount offered by a lender will depend on your circumstances and the reason why your existing term has expired without the loan being repaid.

Loan to value

We are able to fund re-bridging loans up to 75% loan to value (LTV), and can even lend up to 100% LTV with additional security.

As a general rule of thumb, re-bridging is available up to 75% on residential property, 65% on commercial, and 60% on land with planning permission. Higher LTV limits may be available subject to the overall details on the application and can be negotiated case-by-case.

If the application comes with issues, such as adverse credit or something risky for the lender, the LTV may be reduced to a level that the lender is comfortable to lend.

Re-bridging loan rates & costs

Rates

Interest rates are usually quoted on a risk basis, the higher the risk to the lender, the higher the rate. Most re-bridging lenders will simply quote their standard rates if the deal makes sense to them and the risk is small.

For a standard residential property, you may pay around 0.65% per month assuming there are no issues, such as adverse credit. Commercial property will come in slightly higher at around 0.8%, again for simple applications.

If the risk to the lender is higher, rates of at least 1% per month can be expected. If for example the property is commercial, there is heavy adverse credit and the LTV fairly high, you could expect to pay 1.5% – 2% per month.

As mentioned, the cost is generally in-line with the risk involved to the lender.

Fees

Fees will differ lender to lender, but here’s a breakdown of what you can expect to pay.

Lender fee– these are the fee the lender charges to set up the loan and are usually between 1% and 3% of the loan amount. They can usually be added to the loan.

Lender administration fee – some lenders charge an upfront fee for processing your application, they may request this either on application or before offer. This can be a flat fee of somewhere between £200 and £1,000 typically, or a percentage of the loan amount.

Exit fee – this is a fee the lender charger to repay the loan, it’s usually an extra months interest and can be added to the loan.

Valuation fee – most lenders require a valuation of the property. This is to ensure its suitable security for the loan and poses little to no risk in terms of the lender being able to get their money back. These fees generally increase as the property value increases. You can also expect to pay more for a commercial property compared to residential.

Legal fee – there is usually a fee to pay for the legal work involved in setting up the loan. Bridging lenders tend to charge you for their legal fee, as well as your own.

Broker fee – some brokers charge broker fees for arranging the loan. This may be a flat fee or a percentage of the loan amount and is usually payable on completion. Some brokers also charge upfront fees foe looking at the enquiry. In most cases, we don’t charge broker fees at all for arranging bridging loans.

How to get a rebridge bridge loan

What information will I need to provide?

Along with your personal details and the property details, the lender is likely to require the following information:

  • Proof of ID, such as a passport.
  • Latest 3 months bank statements, to ensure everything is ok financially.
  • The existing bridging loan offer from your current funder, to check the original loan terms.
  • Details of why the original loan was taken out, this could be to purchase the property, for example.
  • Details of why you are looking to re-bridge, the term may be ending or you require further funds.
  • Details of your exit strategy, i.e. how you will repay the loan, this could be sale of the property.

How long do they take to complete?

They can be completed in around 5 – 14 days if the property valuation and legal work is done quickly. If there is a deadline for completion you should tell us upfront so we can work to this timescale.

If you’re keen to secure the lowest rates, it might be worth allowing slightly longer for completion as the lender may want to undertake some additional checks.

Who offers rebridging loans?

More and more lenders are entering this market, however it’s still relatively small in comparison to the number of bridging lenders out there.

There aren’t many lenders offering a regulated re-bridge, it is possible, but the market is small. High Street banks tend to shy away from bridging loans altogether, however there are some challenger bans offering bridging and indeed rebridging.

The market for unregulated re-bridging is larger, purely because there are a higher number of unregulated lenders then regulated lenders.

A good bridging loan broker will be useful when looking for a re-bridging loan, as they’ll know who to turn to quickly, especially when time is of the essence or there are deadlines.

How are re-bridging loans assessed?

Applications may come under more scrutiny than standard bridging applications as the lender will want to make sure that they are actually solving the root problem.

As your exit strategy on your current loan has failed, they will want to ensure that the problem is not going to happen again. By offering a bridging loan to an applicant, only for it to fail again, they will only be delaying the problem, rather than solving it.

As such, detail around the planned exit strategy for your existing loan, will be the main issue when the initial assessments take place.

Assuming the exit is considered solid, then the application will proceed in much the same way as a standard application.

The other key considerations for the lender will be:

  • The security property
  • Your credit history (for some lenders)
  • The loan to value requested

FAQs

What steps should I take if my current term is close to expiring?

Refinancing to a new lender will mean more fees and of course, the effort involved in arranging a new loan.

As such, the first step is to understand what fees would be due in the event of default and whether your lender charges default rates.

From there, discuss your circumstances with your current lender early to understand how they’ll approach a delay in being repaid.

If your current lender is unwilling to support you by extending the loan, a switch to a new lender may be the best option available.

Where appropriate, refinancing to a mortgage rather than another bridging loan may be a cheaper option.

Will I have to pay high rates?

Although the application will be seen as higher risk by the lender, the rates charged won’t necessarily be higher than your current loan.

Re-bridging applications are assessed on a case by case basis, so the rate charged will depend on the reason that the first exit strategy failed.

Where the issue is unlikely to be repeated, you will usually find that the rate charged will be lower.

What exit will be acceptable to the lender?

This is key to the success of your application. The strongest exit strategies are refinance to a term loan or sale of the property.

Where you’re planning to refinance to a term loan (mortgage), the lender will want to see evidence that this is possible. Usually, an agreement in principle from your new lender, with confirmation that you will be able to meet their criteria will be required.

Where sale of the property is planned, the surveyor will confirm the likely marketing period for the property. This will be very important as the lender will want to ensure that a sale can be completed before the term of the new loan expires.